Minnesota testing the waters with online lottery sales

Sunday

Nov 27, 2011 at 12:01 AMNov 27, 2011 at 12:50 AM

A quiet revolution in gambling is under way in Minnesota. Without a single press release or announcement, the Minnesota State Lottery is nearly a year into an experiment to get more Minnesotans to gamble online through a subscription lottery service.

BAIRD HELGESON

A quiet revolution in gambling is under way in Minnesota. Without a single press release or announcement, the Minnesota State Lottery is nearly a year into an experiment to get more Minnesotans to gamble online through a subscription lottery service.

Even in a bad economy, the Minnesota State Lottery set a fourth consecutive sales record in fiscal year 2011, bringing in $504.4 million. Of the gambling proceeds, about $121.9 million went for environmental programs and the state's general fund.

In Illinois, sales of Illinois lottery tickets grew by 3 percent last year to set a new record. Officials say sales totaled nearly $2.3 billion, an average of $177 for every person in Illinois.

While lottery sales have climbed every year for nine straight years, Illinois Lottery officials proposed selling lottery tickets online last year - a proposal that, as yet, hasn't gotten anywhere.

Online gambling doesn't have a great record in Illinois. A few years ago, the state made some types of gambling over the Internet illegal, such as online poker.

Private online gambling is also illegal in Minnesota, and the state's elected leaders have turned back various gambling expansion proposals and online gambling ventures.

But in the waning months of Gov. Tim Pawlenty's administration, the Minnesota State Lottery took the first steps toward what could become a massive shift to Internet lottery play. They are looking at the Internet to boost sales as more Minnesotans reject traditional lottery tickets and become more comfortable playing games and buying goods online.

Interim Lottery Director Jenny Canfield, at a lottery seminar last year, said that "We are seeing that decline, and it's happening very rapidly. We have to react quickly to grab back our players, to build up our player base again."

Gambling foes dismayed

The move has taken some gambling critics by surprise. Several, including legislators, said they were deeply troubled by what they see as secrecy, aggressive tactics and a bypassing of legislative approval.

"It's a terrible idea. It's reprehensible," said Assistant Senate Majority Leader David Hann, an Eden Prairie, Minn., Republican who tried to abolish the lottery six years ago. "We are spending a lot of taxpayer money to lure people into throwing money down the toilet so we can spend it on something that we think is more important."

Hann said he wants to explore whether the state lottery has the legal authority to sell tickets online. "To me, it seems like they are exercising some latitude they might not have," he said.

New governor didn't know

Gov. Mark Dayton's administration learned about the online ticket-buying service only recently. Dayton spokesman Bob Hume said the practice started before Dayton took office and that they have not looked into it.

State Rep. Ryan Winkler said it should "absolutely" be reviewed by legislators.

"I certainly want to find out if they have the authority to do it," said Winkler, who sits on committees that review gambling issues. "It look like they are trying to avoid public attention."

Lottery officials say they don't need legislative approval. They liken their online subscription service, which allows players to gamble no more than $50 a week, to electronic commerce, not Internet gambling. "It's within our guidelines," Canfield said.

Minnesota is one of only a few states to offer the online lottery ticket sales, but legislators in other states like New Jersey are considering it. North Dakota and New Hampshire offer similar online lottery subscription services, but neither got legislative approval. When North Dakota moved to the online ticket-buying system in 2005, the state's attorney general signed off, said Randy Miller, director of the North Dakota Lottery.

No one asked A.G.

In Minnesota, the attorney general was never asked to review the idea, said Ben Wogsland, a spokesman for the attorney general. "No one has requested it, and no one has given any advice from our office," he said.

Laura Sweeney, spokesperson for the U.S. Department of Justice, declined to comment on the legality of online ticket sales. The department has shut down numerous online gambling operations around the country.

Lottery officials say there was nothing secretive about the subscription service. They intentionally staged a "soft launch" since they anticipated only a tiny fraction of Minnesotans would use the system and they didn't want to spook retailers who make a commission selling lottery tickets.

Right now, just 7,599 Minnesotans are signed up for the online service. Subscription sales made up just $607,000 of the $500 million businesses. There is no advertising campaign for the service, which can be found by clicking Buy Online on the lottery's home page.

"Some people just feel more comfortable online," Canfield said. "Some more affluent people prefer it."

The online subscription service allows Minnesotans to buy tickets for most lottery games around the clock.

Players can select a length of subscription from six weeks to a year for a half dozen lottery games, playing $2 to a maximum of $50 per week. Once an online purchase is made, the same numbers must be played for the duration of the subscription. Customers cannot change the numbers or cancel a subscription before the subscription runs out. The lottery does not accept credit cards and requires that subscriptions be paid by direct access to a checking or savings account.

Long-term strategy

Minnesota's Internet lottery ticket sales are one component in a bolder long-term online strategy. Lottery officials have come to realize that consumer habits have changed in the 23 years since Minnesotans changed the state constitution to allow lottery gambling - especially among young adults.

In 1998, 73 percent of Minnesotans aged 18 to 24 played the lottery at least once a year. Canfield said that by 2010, that number had plunged to 38 percent. Meanwhile, computer games are increasingly popular and online purchasing has soared to $171 billion a year.

"The traditional approaches are not working and we are not maintaining our player base," Canfield said at the lottery conference.

Canfield who has urged an aggressive approach, such as subscription packages, reaching out through social media and establishing "a strategy to slowly introduce interactive Internet games."

She said political tides surrounding gambling are shifting rapidly and things that are forbidden now could soon be legal.

"If that time comes, I want to be ready," she said.

Back in Illinois, while Gov. Pat Quinn and lawmakers wrestle over potentially expanding gambling, Quinn has been encouraging Illinoisans to buy lottery tickets.

Quinn has said Illinois can't gamble its way to prosperity, but he says he wants people to buy special lottery tickets that benefit veterans.

The $3 ticket is the latest Veterans Cash lottery ticket since the program's inception in 2006. The state says the Veterans Cash lottery tickets have raised $9.5 million for veterans' organizations statewide. The money is used to pay for medical care, disability benefits and housing assistance.